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Supermarket giants, such as Tesco, Morrisons and the Co-op, have revealed price-cutting moves in recent months in a bid to lure back shoppers who have switched to cheaper discount stores.

For example, Morrisons has promised to cut off a total of £1billion from more than 1,200 items over the next three years.

A packet of Jammie Dodgers has dropped from £1.09 to 49p and a 250g pack of the supermarket’s own-brand butter has fallen from £1.49 to £1, it said yesterday.

Tim Denison, a director of the research group Ipsos Retail Performance, said: ‘Food retailers escaped the worst of the recession, in stark contrast to the non-food retailers, but are now feeling the heat as the economy recovers.

‘The years of austerity have left their footprint on shopping habits with the popularity of discounters growing.

‘The price war among the Big Four is really damaging them all and making it into a race to the bottom.’

The British Chambers of Commerce, the business lobby group, said the figures highlight ‘the strong competition among retailers.’

A report published by the Bank of England on Wednesday said it had also noticed the ‘intense competition among retailers, especially in food’.

The Bank of England this week reported increased competition among retailers, 'especially in food'

It also said there is ‘an increasing polarisation’ among food shoppers towards either the ‘premium’ end or the ‘value’ end, with many shoppers using a mix of both.

For example, they might buy all their meat in an expensive supermarket which sells good quality meat, but buy everything else form tinned tomatoes to bags of apples in a discount shop.

Cheaper trips to the supermarket represent a huge relief for families at a time when workers have faced six years of pay freezes or paltry pay rises. Some have even been hit by pay cuts.

The average pay rise in the private sector is just two per cent, above the current rate of inflation of 1.6 per cent according to a report published today [fri] by the pay research firm XpertHR.

But some workers are still being hit by a pay freeze, with seven per cent of pay deals resulting in a pay freeze.

Ian Geddes, UK head of retail at Deloitte, the accountancy firm, said: ‘Many consumers are yet to feel the benefits of the economic recovery and are reluctant to let go of their recessionary behaviours, particularly when shopping for food.’